Basel III monitoring exercise

The new supervisory framework developed by the Basel Committee on Banking Supervision (BCBS) and known as "Basel III" is a comprehensive set of regulatory measures, aimed at strengthening the supervision and risk management of the banking sector at global level.

The European Banking Authority (EBA) has been monitoring and assessing the impact of the Basel III rules on a sample of EU banks since June 2011. This exercise is performed on a semi-annual basis with end-December and end-June reporting dates. It follows the Comprehensive Quantitative Impact Study (C-QIS) that was conducted by CEBS and published in December 2010.

The participation of banks in the monitoring exercise is voluntary and data are only reported on an aggregate basis, in order to guarantee the anonymity and confidentiality of credit institutions.

The exercise monitors and assesses the following aspects of the Basel III implementation:

Impact on capital ratios and shortfall, resulting from changes in the definition of capital stemming from the new standard, referred to as common equity Tier 1 (CET1). The changes include modified rules on capital deductions and the eligibility criteria for Tier 1 and total capital;

Impact on capital ratios and shortfall, resulting from changes in the calculation of risk-weighted assets (RWA) stemming from the new definition of capital, securitisation, trading book and counterparty credit risk requirements;

Impact from the implementation of the capital conservation buffer;

The adequacy of leverage ratio; and

The adequacy of two liquidity standards – the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR).

After the finalisation of CRD IV, the Basel III monitoring exercise will assess the impact of the implementation of CRD IV.

Comprehensive Quantitative Impact Study (C-QIS)

To assess the impact of the new capital and liquidity requirements as set out in consultation published by the Basel Committee in June and December 2009, the Committee of European Banking Supervisors (CEBS), the EBA's predecessor, conducted a so-called comprehensive quantitative impact study (C-QIS) based on data as of 31 December 2009. The main results of this impact study have been published in December 2010.

The C-QIS is not comparable to the Basel III monitoring reports, as it assessed the impact of policy proposals published in 2009 that differed significantly from the final Basel III framework.